Government assistance for entrepreneurs and all businessess

Government assistance for entrepreneurs (6)

- Loan guarantee schemes: repaying a percentage of loans in case of failure

- Government subsidies

- Financing workshop building, and providing rent outs at low prices

- Providing information, advertising schemes and training programs

- Reducing paperwork and legal formalities associated with setting up a business

- Decreasing corporate tax

Government grants

Money available from the government to fund projects that it wants to support. The money is not repaid, but there are conditions and often, progress reports are required.

Government assistance for all businesses (4)

- Subsidies to keep prices down

- Subsidies to stop a loss-making business from failure and protect employment

- Grants to relocate to areas with high unemployment

- Financial support for customers to buy products (such as a house) to increase national output

Advantages of subsidies

- Avoiding unemployment in case of potential business failure

- Avoiding business failure keeps suppliers in business

- If a business fails, consumers may switch to buying imported goods making the balance of payments worse (financial inflow into the country vs. outflow of money to the rest of the world)

Disadvantages of subsidies

- Governments might have to increase tax or cut other subsidies

- Buying only subsidized goods at lower prices can cause a distortion in the market

- Subsidies become a disincentive for businesses to become more efficient